M&S Reports Strong Christmas Sales, Admits ‘Environment Remains Challenging’ Following UK Tax Hikes

• M&S has reported record sales over the Christmas period.
• The retailer said it remains cautious as it enters 2025 amid upcoming tax increases.
• Stock in the retailer fell despite strong sales.
• M&S has been carrying out a transformation strategy to adapt to the changing retail landscape.

Marks & Spencer (M&S), one of the U.K.’s most iconic high street retailers, has celebrated “another good Christmas” of strong sales, breaking a record for its biggest-ever day of food sales on Dec. 23.

However, the retailer, which has been closing stores nationwide, remains concerned about increased costs from the government’s tax increases.

Strong Christmas for M&S

The U.K. retailer reported sales at its food halls rose 8.9% over the Christmas period, making it one of the best-performing supermarkets in the country, according to Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

The retailer’s clothing, home, and beauty division also managed to grow like-for-like sales by 1.9% and “scoop up additional share in a challenging market,” Chiekrie said.

Growth through online channels was particularly strong in these separate divisions, increasing by double-digit rates and accounting for a third of the division’s sales.

“Online growth will likely remain a big driver of performance moving forward as the high street continues its slow-burning decline,” Chiekrie added.

M&S ‘Not Complacent’

Despite posting good sales over the Christmas period, the retailer has remained cautious about the future, citing concerns over higher costs  under the Labour government.

“This was another good Christmas for M&S, building on a strong performance in the prior year,” CEO Stuart Machin said. However, he added: “We’re not complacent.”

The refusal to become complacent comes amid the plummeting of the pound to its lowest level in 14 months and the announcement of £40 billion in government tax rises starting in April.

In a Christmas report, the company said : “The external environment remains challenging. As we enter the new year, the outlook for economic growth, inflation and interest rates is uncertain and the business faces higher costs from well-documented increases in taxation.”

According to the British Retail Consortium, retailers will face  a £7 billion increase in their costs in 2025 after the government’s increases to employers’ national insurance contributions come into force.

M&S Stock Falls

M&S, which has a market cap of £7.72 billion ($9.5 billion), saw its stock fall 6.4 percent to GBx 352.30 on Thursday, Jan. 9, after the company warned that the outlook for the year remained “uncertain.”

The stock fell despite the retailer posting record-breaking sales, highlighting the analyst’s economic concerns for the future.

The falling stock follows five research firms assigning the supermarket a “Buy” rating last week, reflecting growing confidence in the company’s ability to navigate a challenging retail landscape through strategic realignments.

M&S Closing Stores

M&S began its store closure and restructuring strategy in 2016  after reporting months of declining profits.

Under former CEO Steve Rowe’s turnaround plans, the supermarket has been closing down its “full-line” legacy stores in favor of smaller food-only shops.

M&S leadership aims to reduce  the number of full-line shops to 180 by 2028, a significant decrease from 247 in 2022.

At the same time, the number of “Simply Food” stores will increase from 316 to 420.

“Transforming M&S is a marathon, not a sprint, and we go into 2025 shifting up a gear and raring to go as we accelerate the scale and pace of change,” Machin said  in a Christmas update.

Why Is M&S Closing Stores?

As customer habits have moved to primarily online  shopping, M&S has been on a transformation strategy to adapt to the changing retail landscape.

Shifting consumer habits have reduced the company’s reliance on physical stores, prompting it to reassess its extensive high street presence.

This restructuring allows M&S to focus on profitability and efficiency , channeling resources into more promising areas such as its growing online platform and high-performing stores.

Archie Norman, Chairman of M&S, said in a corporate company release  that the objective was to get up to half of all the company’s clothing and home business ordered online.

“This channel shift will be supported by our emerging competitive advantage on data, so we will be able to talk to each customer as an individual, moving away from “one message fits all” marketing.”